What discount rate should peter pet foods use to evaluate

Assignment Help Financial Accounting
Reference no: EM132949102

Problem 1: Peter's Pet Foods has a WACC of 12.5 percent and is considering manufacturing pet toys. Tim's Toys specializes in pet toys and has a WACC of 10.5 percent. What discount rate should Peter's Pet Foods use to evaluate this investment?

a) 10.5 percent because that is appropriate given the risk of the project
b) 12.5 percent because that is the appropriate rate for the company
c) 11.5 percent because after investment Peter's will be a combination of the two businesses
d) A weighted average of 12.5 and 10.5 with the weights based on the proportion in each business
e) The risk-free rate.

Reference no: EM132949102

Questions Cloud

Prepare finance costs on the outstanding liability : Prepare finance costs on the outstanding liability for the year ended December 31, 2018 assuming that the company was using the ASPE accounting platform.
How much is the over allowance : How much is the Over (Under) Allowance? How much is the Gain or Loss on Repossession? how much is the balance of the Trade In and the Repossessed Item?
Explain the combinations of ownership : Dispersed Ownership and Weak Control, Explain the combinations of ownership and control around world and critically discuss their advantages and disadvantages.
How much would be the initial transaction commission : By using tables or graphs show (and discuss) how much you can reduce the company's foreign exchange exposure.Please explain your working and solution.
What discount rate should peter pet foods use to evaluate : Tim's Toys specializes in pet toys and has a WACC of 10.5 percent. What discount rate should Peter's Pet Foods use to evaluate this investment?
List the barriers that prevent financial markets : List the barriers that prevent financial markets from becoming completely integrated and then critically review the motives for investing
Calculate the inventory turnover ratio and number of days : Discuss each of these ratios states about the company's efficiency in managing its inventory, and how they compare to the industry average.
What is the financial leverage of the company : A company generates ROA of 3.5% and has sales of $3,400, What is the ROE of the company? ?What is the financial leverage of the company?
How do determine the ending inventory cost using fifo : There are 30 units of the item in the physical inventory at December 31. The periodic inventory system is used. Determine the ending inventory cost using FIFO.

Reviews

Write a Review

Financial Accounting Questions & Answers

  What is the current price of the bonds

Your company issues 7% coupon bonds with a face value of $1,000. What is the current price of the bonds

  What is the companys eps

Estimated price-to-earnings ratio (P/E) is 32. Daido borrows funds to repurchase shares at its after-tax cost of debt of 5%. What is the company's EPS

  Why is the relationship between the levered and unlevered

Why is the relationship between the levered and unlevered P/B ratios depend on the effect of financial leverage (FLEV)? What is a change in a firm's leverage?

  Which of these costs are deductible

Jennifer is a sole proprietor. She owns, leases, and manages apartment buildings. During 2014, Jennifer incurred the following costs. Attorney's fees of $350 for title searches on new property Jennifer acquired. Which of these costs are deductible? I..

  Explain the difference between profit and profitability

Explain the concept of going concern and the implication of revocation of going concern assumption when financial statements are prepared.

  Journalise the transactions

X Limited Issued 10,000, 12% debentures of S100 each payable $40 on application and $60 on allotment. The public applied for 14,000 debentures. Applications for 9,000 debentures were accepted in full; applications for 2,000 debentures were allotted 1..

  Compute taxable income from her bookstore activity

In 2016, Wilma Way's sole proprietorship, WW Bookstore, generated $120,000 net profit. In additon, Wilma recognized a $17,000 gain on the sale of business furniture and shelving, all of which was recaptured as ordinary income. The business checking a..

  Give four ways smarts embezzlement could have been prevented

Scott Smart served as executive director of Downtown Huntsville, an organization created to revitalize Huntsville. Give four ways Smart's embezzlement could have been prevented.

  Can a portfolio standard deviation be standard deviation

Can a portfolio standard deviation be less than the standard deviation of every asset in the portfolio? If yes, please give an example.

  Find how much will he have in five years

a student contributes $50 a month to an ordinary annuity paying 6 ½ % annual interest, compounded monthly. How much will he have in 5 years?

  Example of transaction

Please give us an example of a transaction where there are two increases. Note that you will still need to have at least one debit and one credit. Indicate which account will be debited and which will be credited.

  Explain the concept of the triple bottom line

Explain the concept of the triple bottom line. As an IT manager, can you help the company reach its goals regarding this concept? Why or why not

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd